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Winning the Chess Match

Against the City

From the “this could only happen to a strip club” file, the police came in to Play Pan in L.A. and ripped their permit off the wall—then told the club’s operators they were being shut down because they were operating illegally without a permit. Here’s what attorney Roger Jon Diamond did to defeat the police, and the city, at their own game.

This article will discuss new techniques the government is using to restrict, limit or control the opening or continued operation of adult cabarets. For illustration purposes, this article will feature the situation in Los Angeles, but the legal “chess match” described here is relevant to the entire United States.

Like bacteria that become adjusted to new antibiotics, cities and counties have tried over the years to develop more sophisticated methods of controlling, restricting and prohibiting adult cabarets and similar businesses. The techniques used by cities and counties have become more sophisticated and subtle with respect to the violation of the First Amendment.

To understand what is happening in many jurisdictions, I need to explain the law regarding the issuance of the permit versus the revocation of the permit. Typically, a law dealing with the issuance of a permit for activity protected by the First Amendment provides the applicant with an opportunity to obtain the required permit at a public hearing. The regulatory ordinances cannot confer unbridled discretion upon the decision maker or makers to grant or deny the required permit.

Unfortunately in the real world one cannot simply rely upon the expectation of winning a facial challenge to an ordinance. Business people need to plan and need to know in advance whether they are going to be permitted to operate or not. Therefore, it is usually wise to apply for the required permit. Many judges do not like dissatisfied license applicants going to court first without making some effort to get the required permit. Once a permit is issued the business operator is on more solid footing with respect to the right to keep the permit. Having the permit in hand gives the cabaret operator a stronger position if there is later to be a dispute regarding the continued possession of the permit.

Round One: Police action & lawsuit

We now come more specifically to the problem facing a strip club in Los Angeles known as the Play Pen. The Play Pen is a typical adult cabaret that has been operating for many years in downtown Los Angeles. It had an existing entertainment permit from the City of Los Angeles. The City of Los Angeles has an ordinance that requires any business presenting entertainment of any kind to first obtain the required permit from the Police Commission.

On July 11, 2013, police officers of the City of Los Angeles entered the Play Pen business and literally took the permit off the wall and then declared that the manager was operating illegally because he lacked the required permit (the one just removed from the wall by the police). The manager was then arrested for operating without the required permit. The City took the position that the police could do this because the police asserted that there had been a transfer of ownership of the business and therefore the new operator was not operating with a permit. I immediately filed a lawsuit and recovered the permit. The club immediately reopened and ended up receiving an award of attorney’s fees.

Round Two: The City gets cute

The Play Pen was transferred to a new operator. The new operator needed to apply for a new entertainment permit because the permit is not transferable. A new operator did take over, and this owner then applied for the required permit from the City of Los Angeles to conduct an adult cabaret.

Here is where the City of Los Angeles got cute. The controlling ordinance of the City of Los Angeles requires the city to issue or deny the required permit within 45 days of the application. The City Attorney and the Police Department apparently got together and decided on a new sophisticated system designed to restrict or limit adult cabarets. Specifically, the new system allows the Police Department neither to grant or deny the application within 45 days. Instead, the Police Department takes its sweet time.

To avoid a constitutional challenge to the refusal of the Police Department to act upon the application for the permit within 45 days of its submission, the City developed a scheme to issue a temporary permit. The temporary permit theoretically allows the operator to operate while the City decides whether to grant or deny the permit (the permanent permit). The City apparently felt that the issuance of a temporary permit insulated the City from liability because theoretically the operator can operate while in the possession of a temporary permit. The City did not think anybody would challenge the system because as long as the operator can operate the argument went that the operator would have no legal basis to complain since a judge would presumably ask the operator, “What is your problem—you have a permit although it is temporary and therefore you can keep operating?”

My concern, later proven to be correct, was that the prolonged review of the application over many months and, indeed, over one year, would allow the Police Department to find some basis for denying the permit. Essentially what the City was doing by issuing temporary permits was buying time to allow further investigations of the club while it operated under a temporary, limited in time, permit. Then the City would find an objective, specific act to justify denial of the permanent permit. In other words, the applicant would be on a type of probation which could be easily terminated upon the occurrence of a specific act. In this way the City would not have to rely upon an invalid, vague standard for denial of the permit. It would take a little more time, but the City would accomplish its goal of denying the permit.

In this particular case, over the course of many months, undercover officers went to the location to try to detect prostitution. During the existence of the temporary permits the police did find allegedly one act of prostitution, but I won that case in court so there was no conviction for any dancer for prostitution.

Meanwhile, the lawsuit that I filed to compel the issuance of the permanent permit was going to be heard on July 22, 2016. What the City was trying to do was avoid issuing a permit and then having to revoke that permit, because the revocation process favors the applicant to the extent that a court would have more independent authority to review the basis for the revocation.

Round Three: Call their bluff

Faced with a likely win by the Play Pen, the City hastily set the matter for hearing before the Police Commission for July 20, 2016 two days before we were scheduled to go to court to expose the subtle and sophisticated scheme to make it easier for cities to deny the initial application for the permit.

The Police Department and the City Attorney contacted me and said that the City was willing to give the permanent permit that we had been seeking for 14 months. With the permit was issued, without the club ever having ceased to operate, it would make the recovery of damages very difficult because as long as the club continued to operate it was not suffering any losses. The City Attorney, however, said there was one proviso for the immediate issuance of the permanent permit on July 20, two days before the court session. Specifically, the Play Pen had to agree to certain conditions that the Police Department said were basically very innocuous, conditions such as having no graffiti or agreeing to employ more than one security guard or agreeing to report any arrest within 48 hours to the police department.

There were about six conditions that arguably my client could have lived with but we were very suspicious, because it looked to us like any condition would allow the City at a later time to come in and ask for revocation of the permit based upon a violation of the condition. We felt any Police Department that was willing to go in originally and rip off a permit from the wall would not be reluctant to go back and try to get a revocation based upon the violation of a condition. In other words the imposition of conditions would take away some protection that the law provides. Accordingly, we called the bluff of the City and said we would not settle for any permit that had any conditions.

The question was whether the City could impose so-called “reasonable conditions.” The City Attorney argued that the City could impose reasonable conditions but I referred the City to City of Lakewood v. Plain Dealer Publishing Co., (1988) where the Supreme Court held that the ability to impose conditions itself violated the First Amendment if the law authorizing the conditions was not specific. The Supreme Court stated, “We hold those portions of the Lakewood ordinance giving the Mayor unfettered discretion to deny a permit application and unbounded authority to condition the permit on any additional terms he deems ‘necessary and reasonable’ to be unconstitutional. . . .”

The City Attorney cited Tily B, Inc., v. City of Newport Beach, (1998), but I pointed out to the City Attorney that that case involved the revocation of a permit, not the imposition of conditions. Indeed, there was favorable language in the Tily B decision that supported my argument. The Court of Appeal stated in Tily B, Inc., v. City of Newport Beach, “Giving an administrator unbridled discretion to issue a permit for a sexually oriented business is an unconstitutional prior restraint on speech. . . .”

The Play Pen refused to accept the offer of the permanent permit if there were any conditions imposed. The City backed off at the last moment. The vote was close because when we went to the Police Commission on July 20, 2016 there were only four of the seven members present and therefore we needed all four votes. Two of the Commissioners present had historically been hostile to adult cabarets. However, I had my prior victory and attorney fee award to show the Commission that if they voted to deny the permit we would win in court. I am happy to report that the Police Commission (technically known as the Police Permit Review Panel) voted four to zero on July 20 to grant the permit without conditions and pay attorney’s fees This discussion is very wonkish and technical, but knowing the nuances and differences regarding permitting laws is extremely important to the success of the business.

First Amendment attorney Roger Jon Diamond has been successfully defending adult businesses and other individuals for over 40 years. He is also a frequent Club Bulletin contributor and EXPO legal panel participant. Diamond’s office is located in Santa Monica, CA, and he can be reached there at (310) 399-3259 or via email at rogdiamond@aol.com.